Great Plains, Westar reflect on failed $12.2B acquisition

Thursday

May 4, 2017 at 4:32 PM

Morgan Chilson

Great Plains and Westar Energy are working hard to see if they can put together a deal that would be acceptable to their regulating agency.

But a little Monday morning quarterbacking of the failed acquisition bid raises questions why the leadership of the two companies didn’t know the deal might not fly. The Kansas Corporation Commission staff came out harshly against the proposal when it was originally filed and most of their objections are reflected in the KCC’s final order denying the $12.2 billion acquisition.

A utilities analyst later said the failure of Great Plains and Westar staff to be flexible was clearly part of the reason the deal failed.

“Hindsight is 20/20,” said Chuck Caisley, Great Plains spokesman. “I would tell you we never intended to be anything less than transparent, and we honestly believed we were putting forth sufficient evidence so that others would see the strategic and operational value of this transaction. We clearly didn’t. The commission said we did not meet the merger standards and as a result, that transaction is now over.

“There’s no grudge to hold here,” he added. “That is staff’s job. That is CURB’s (Citizens’ Utility Ratepayer Board) job, and that is the commission’s decision and that’s what they’re empowered to do on behalf of the state of Kansas. Rather than go back and look at what could have been done differently — because there was no intent to be aggressive or inflexible — rather than go back and think about what we could have done, our firm desire is to say we heard you, we heard every last thing you said.”

As the two companies work together over the next weeks to try to reach a deal that will satisfy the concerns that KCC commissioners expressed in their final opinion, Caisley said things will change.

“We want to address the commission and other parties’ concerns, and we believe there’s a possibility that we can do that,” he said. “I think Westar does too. As we approach this next round, we’re going to double down on trying to be collaborative and doing as much as we can to listen.”

On Thursday, Great Plains and Westar filed a Petition for Reconsideration, the next stage in trying to move the deal forward after the KCC rejected it more than a week ago. Great Plains CEO Terry Bassham said Thursday that both companies believe they can take on the factors highlighted by commissioners as stalling the deal, including a high price and concerns about capital structure.

“We heard the commission loud and clear, and we still think there could be a path here,” Caisley said. “To be clear, any deal that we have would have to clearly benefit customers, clearly meet the merger standards that exist in Kansas, and be in the public interest, and now we have a 40-page document that spells out very clearly exactly where the commission’s concerns lie in those areas.”

It’s important to Great Plains that the situation move forward, Caisley said.

“We need to make decisions; we need to move forward,” he said. “We can’t existin a state of uncertainty as to what the path is for an extended period of time. For Westar, they’ve been going through an extended period of looking at their options for suitors, and for us now, we’ve had almost a year of running our operations but simultaneously planning for integration and looking at how to put two companies together.

“We need to get clarity with respect to our direction and our future, but it’s not an emergency thing,” Caisley added. “We’ve done this for a year and we can do this for a month more.”

Now that they’re further into the integration process, some of the concerns raised by the KCC can be answered more easily, he said.

“Ironically, a couple of days before the KCC issued their ruling, we had determined that there were probably going to be less than 10 involuntary separations resulting from this transaction,” Caisley said. “But that wasn’t in the evidence and that wasn’t in the testimony. We can now very effectively say we think it’s probably, if not just guaranteed, that there won’t be any involuntary layoffs as a result of this transaction.”

Great Plains and KCP&L, its subsidiary, have been changed for the better by the process, he added. The opportunity to spend hours with Westar Energy, comparing best practices and taking a deep dive into how they operate, was transformational.

“No matter what the future holds, because we’ve had an opportunity to get to know Topeka, because we’ve had an opportunity to work with a bunch of really good people from Westar, our company has been changed for the better,” he said.

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